Xerox (XRX) Q2 2026 earnings summary

Executive summary

• Q2 2026 revenue rose 22% year-over-year to $1.92 billion, driven by the Lexmark acquisition and Print & Other segment strength, though pro forma revenue declined 6.5–7%.

• Adjusted operating income surged to $203 million, with margin expanding to 10.6%, up 690 basis points year-over-year; net income turned positive at $13 million.

• Free cash flow improved to $37 million from a negative $11 million in the prior year quarter.

• Strategic priorities advanced: increased Lexmark synergy target to $350 million, expanded product lineup, and reduced debt by over $200 million.

• Monetized $105 million in tariff receivables for $80 million in cash following a Supreme Court ruling.

Financial highlights

• Equipment sales revenue grew 15.2% year-over-year to $387 million, but declined 13% pro forma; post sale revenue increased 30.7% to $1.35 billion, but declined 3.9–6.8% pro forma.

• IT Solutions revenue declined 8.9–10% to $189–$194 million.

• Adjusted gross margin was 36.4%, up 610–710 basis points year-over-year; gross profit was $688 million (35.8% margin).

• Adjusted EPS was $0.38, up from $(0.64) year-over-year; GAAP EPS was $0.07.

• Ended Q2 with $552 million in cash and equivalents; total debt at $4.2–$4.22 billion.

Outlook and guidance

• Full-year 2026 revenue guidance raised to approximately $7.6 billion.

• Adjusted operating income guidance increased to $555–$605 million, reflecting a $105 million pre-tax IEEPA tariff benefit.

• Free cash flow guidance set at ~$250 million, including $80 million from the sale of IEEPA tariff receivables.

• Operating cash flow guidance for 2026 revised to ~$340 million, down from $350 million, due to higher restructuring and interest expense.

• Gross and net leverage projected to fall to under 5x and 4x, respectively, by year-end 2026.